Telkom - in which the government owns more than a 50% stake jointly with state-run pension fund Public Investment Corporation - was up 3.8% at R21.14 by 10am yesterday.

Citing a source close to the communications ministry, Business Day said the government could fully nationalise Africa's biggest fixed-line phone operator.

"The government is looking for a way to direct Telkom to meet its developmental agenda without being hampered by the rules of the [Johannesburg Stock Exchange]," the newspaper quoted the source as saying.

Communications ministry spokesman Siya Qoza said, however, that the report was "not close to the truth", but added the ANC was best-placed to comment.

"I don't know what they want to do with Telkom, but as far as I know it's not government policy," Qoza said.

ANC spokesman Jackson Mthembu said: "I'm not aware of Telkom being in any policy documents, but anything is possible at the policy conference."

The ANC will hold a major policy meeting next week and has been pushing for greater state control.

Earlier this month, the cabinet turned down South Korean firm KT Corp's $385-million offer for a stake in the company, saying it was a strategic asset in its plan to roll out internet services to all South Africans by 2020.

The deal with KT Corp would have diluted the government's holding to less than 50%.

Analysts have said the rejection of the offer underscored the apparent determination of the government not to cede control of a company that many in the ANC view as an arm of government.

The ANC last year tried unsuccessfully to roll back approval for Walmart's $2.4-billion acquisition of retailer Massmart.

Telkom, which last week posted a one-third drop in profit and suspended dividend payments, has been hit by hefty start-up costs at its new mobile arm and falling sales from its mainstay fixed-line phone business. - Reuters